Minimum-wage increase: Coalition pushing Legislature to try again

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Raise The Wage information kiosks run by AFSCME Council 5 can be found at this year's Minnesota State Fair.

One of the great mysteries of the 2013 legislative session was the failure to pass a minimum-wage increase.

With the DFL holding across-the-board political power for the first time in more than two decades, a substantial increase in the minimum wage seemed a no-brainer.

In fact, both the House and Senate did pass minimum wage increases, but the Senate version was so tepid — an increase to $7.75 by 2015 — that it died of apathy in the House as the session closed. (There’s currently a two-tier minimum wage in the state, $6.15 and $7.25, although realistically, most minimum-wage workers receive the higher amount.)

The push for a meaningful increase began again Tuesday as a coalition of DFL House members, labor and religious leaders and heads of some nonprofit organizations held a rally/news conference at the State Fair.

They want to see the minimum wage increased to $9.50 by 2015, the amount that the House DFL passed in the last session.

In the minutes before the rally was to begin, Gov. Mark Dayton asked if he, too, could attend the event. He was welcomed with open arms.

An increase in the minimum wage didn’t seem to be a top priority with the governor last session. But he appears ready to push hard for $9.50 now — perhaps, even more.

Dayton calls for ‘living wage’

Dayton doesn’t use the term “minimum wage.’’ He uses the term “living wage,’’ generally meant to be the wage needed for a person to support a four-person household. In today’s economy, a “living wage” would be about $13 an hour.

The governor seems baffled as to why increasing the minimum wage is so difficult.

“If we’re underpaying people, taxpayers have to make up the difference,’’ he said. “It [a living wage] is as conservative of principle as you can get.’’

That point — that taxpayers subsidize businesses that pays low wages — is a constant in this debate.

Bernie Hesse, political director of the United Food and Commericial Workers, says that taxpayers are subsidizing every “big-box store’’ to the tune of $500,000 a year with programs for the poor. Low-paid workers, he said, must rely on public housing subsidies, medical assistance, school lunch programs and a laundry list of other public services to survive.

But Dayton’s notion that “a livable wage” is a conservative principle has not exactly caught fire with Republican legislators. Not a single GOP member of the House or Senate supported an increase in the minimum wage last session. None appears to be seeking to get on board the minimum-wage bandwagon now, either.

Republicans continue to say that an increase in the minimum would hurt businesses — especially along the state’s borders — and would ultimately create layoffs.

The key role for Dayton, then, will be to put pressure on Senate Majority Leader Tom Bakk.

“We just sort of ran out of time,” Bakk said at the close of last session when asked about the failure to act on minimum wage.

Unenthusiastic Bakk, Senate

But Bakk never showed much enthusiasm for a minimum wage increase throughout last session — and he certainly wasn’t excited by the House version, which not only increased the minimum to $9.50 but did such things as reduce the work week to 40 hours from the current 48. (The 48 -hour work week is pushed by the ag industry and resort owners, because of seasonal work surges in those industries.)

There are many theories as to why Bakk — and the Senate DFL caucus — has been so shy on this issue that has popular support.

MinnPost’s James Nord reported at the close of last session that Bakk used the minimum wage as a bargaining chip with the GOP. He got needed Republican votes on a bonding bill for Capitol repairs in exchange for not acting on a bullying bill and the minimum wage, three sources told Nord.

Bakk denied making the end-of-session trade-offs. However, he can’t deny that an increased minimum wage was never a priority. There likely are a number of reasons for that.

MinnPost photo by Doug GrowRep. Ryan Winkler, who’s leading the push for the $9.50 wage, makes his case during the State Fair news conference.

Many progressives, including DFL legislators, believe Bakk bent over backward to “listen” to business leaders in the state. He frequently mentioned his conversations with the business community during the session.

In part, Bakk may listen so closely to business because his caucus now includes several “pro-business’’ DFLers from the suburbs. They won traditional GOP seats by vowing they were not your father’s tax-and-spend sort of DFLer.

Bakk also understood that the session included many “tough votes” for moderate DFLers. There was the fourth income-tax tier. The toughest vote of all was the vote to give day-care and personal-care attendants the right to organize unions. That vote was accompanied by heavy, heavy lobbying from unions.

In the end, Bakk said he could not have found enough Senate votes to support anything approaching the House level of a minimum-wage increase.

House DFLers raise their eyebrows at such talk.

“The Senate could get the bills passed it wanted to pass.’’ That’s how Rep. Ryan Winkler, the leader of the push for the $9.50, sums up what happened in 2013.

Now, the push begins again.

Shar Knutson, president of the AFL-CIO, suggested that perhaps supporters of a substantial increase in the minimum wage assumed that it would be relatively easy to pass last session. There will be no such assumption this time.

Real-life stories

At the State Fair, Knutson was surrounded by minimum-wage workers from a number of different jobs and ethnic backgrounds.

There was a mom, Jessica English, with roots in rural Minnesota, who spoke of stocking shelves at a grocery store and then going home to face four children and an empty pantry.

There were others as well, telling stories that once got DFL hearts pounding.

“Our coalition is growing every day,” Knutson said.

MinnPost photo by Doug GrowJessica English shared her family’s story at the State Fair rally.

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Comments (23)

“That point — that taxpayers subsidize businesses that pays low wages — is a constant in this debate.”

if taxpayers are subsidizing by filling in the gap between the current minimum wage and the livable wages, will my taxes go down once the minimum wage is raised and that subsidy is no longer needed? Because the government will no longer have to supplement – correct? Or will that tax money just go elsewhere?

Just wondering.

On a second point, is anyone concerned that the increase in minimum wage will just be passed along in the form of price increases? A fast food restaurant is going to have the same labor pool, with the same skill sets and productivity levels, at $7.25/hr as it will at $9.50/hr. Is it expected that businesses will absorb this increase without modifying prices? Or will prices go up? Because if prices increase, the livable wage calculation will change too. Or is it expected that the workers will be more productive at $9.50/hr allowing productivity to rise to minimize the need for price increases?

Final point. The higher the wages, the more economical it becomes to consider automation. Most of the jobs effected by minimum wage laws are less skilled, labor / service oriented positions. How many jobs will be lost to automation?

With all that said I don’t see how we can make such a large jump in one sweeping move without the prospects of a slew of negative reactions. We need a bill that shows a gradual increase over a period of time (5 years maybe) to get closer to the livable wage goal that will help businesses absorb the increases without resulting to price increases or job losses.

“Is anyone concerned that the increase in minimum wage will just be passed along in the form of price increases?”

I can only speak for myself, but I will say no, I am not. A cheap hamburger does not mean so much to me that I will deny the people who produce it a decent wage. Just as taxpayers are subsidizing a low minimum wage, the minimum wage workers are subsidizing my more affluent lifestyle. They are just doing it with their labor. The dollar menu at McDonald’s may go, but it is a worthwhile sacrifice for a somewhat better life for the workers.

Look, I’m not even going to comment on the nitwittery of the governor’s remarks other than to point out the obvious that a government-mandated “living wage” is not a conservative principle. The conservative principle regarding wage is that people should be paid what the labor market has determined is the value of their labor, not what the government thinks you “need.” They used to do that in Eastern Europe.

Your labor is only worth what an employer is willing to pay for it. If your current wage is insufficient to support yourself or your chosen family size, it’s up to you to upgrade your market value.

It’s instructive that the labor unions are pushing this. Dollars to donuts their labor agreement includes a clause that ties their wage to increases in the minimum wage.

Given that conservatives seem to consider themselves the experts on economics, you should probably now consider taking your argument past one individual anecdote – that your cartoon person who is making too little should toughen up and increase their market value – and consider the economy as a whole. If everyone who is paid less than minium wage simultaneously went out and increased their market value tomorrow, they would all still be worth less than minimum wage.

It’s a zero-sum game. So while it’s true that *anyone* can increase their market value, it is certainly not true that *everyone* can. By shifting from the big picture to personal anecdotes conservatives use slight of hand to hide the important point, which is that this is a rigged game and somebody is going to get paid minimum wage.

I don’t claim to know what should be done about this – there may be some merit to the argument that increasing the minimum wage will help some people at the bottom while putting others out of a job, and academic economists seem split on the matter – but this myth that those making too little to live on are deserving of it has to stop. The places they occupy on the economic ladder will exist for someone no matter what, even if *everybody* works hard.

let the markets decide what the wage should be. The government should no more be setting a minimum wage than it should be setting the price for a loaf of bread.

Here’s a question for you. Are you in favor of the push for the “immigration reform” legislation? Because with millions more people in the labor market competing for entry level jobs, what do you think that will do to the prevailing wage?

Will market forces cause the wages for entry-level workers to increase or will the wages be pushed down due to many more bodies competing for those scarce jobs?

So are you for improving the lives of poor people or are you for making it worse for them through “immigration reform?

There is no free market for CEO pay; it’s determined by an interlocking directorate of other corporate board members. It’s a very incestuous situation. So why do we need free market wages at the bottom?

Perhaps labor organizations should be freed from the onerous restrictions of the Taft-Hartley Act. It robbed them of their best organizing tactics, and precipitated the decline of union density. It outlawed secondary boycotts (free speech, anyone?), hot cargo agreements, and allowed states the choice of requiring unions to represent non-dues paying free loaders. Someone gets union-negotiated benefits but doesn’t have to pay for them? No free market there, and no conservatives grumbling about it either.

is ultimately decided by the shareholders, not the government. Although I’ve heard leftists in congress say they want the government to limit CEO pay, so they are in favor of government setting maximum pay in addition to minimum pay.

It’s been my experience that unions negotiate wage floors for their workers, not ceilings. I used to hire new computer science grads for 80k a year to start. If they had been unionized, the union would have been demanding 60.

According to those pointy headed professors in those bastions of liberal thought (colleges) shareholders set pay. Of course we know that in the real world that’s laughable, and you know better, too. CEO pay is a heads-I-win-tails-you-lose proposition. What shareholders would choose to give a failed CEO a golden parachute?

No one in Congress has proposed limiting CEO pay. Some have talked about limiting the DEDUCTIBILITY of CEO pay. Therein lies a huge difference, Mr. Tester. Over the last 40 years CEO pay relative to pay on the (sweat)shop floor has gone through the roof. There has been no demonstrable positive effect on corporate performance. Indeed, corporate America has fought tooth and nail the requirement of NON-binding CEO pay resolutions.

When the government subsidizes CEO pay by allowing tax deductions for exorbitant salaries, they government is indeed meddling in CEO pay.

I have worked under as well as have read numerous collective bargaining agreements. None had any connection between negotiated wage rates and the minimum wage.
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Conservatives always trot out this old canard; it just isn’t so.

that raising the minimum wage actually depresses jobs, it truly is a no brainer. Failing to pay a living wage is a form of exploitation, and despite the fantasy of some that these workers should just “upgrade” themselves, we will always need people to work at big box stores and gas stations. These jobs just don’t require any “upgrades.” Since these jobs are necessary, they should pay a living wage.

The DFL needs to get its act together on this. We don’t want to end up Texas-style poverty rates.

Tim, my guess is that your taxes will not go down and will instead go to the backlog of infrastructure repair projects that benefit everyone. I think most people would prefer this to supplementing the income of Walmart workers whose personnel directors specifically tell employees how to game the system and call it part of their compensation package.
However, in the event that a higher minimum wage immediately gives these workers more disposal income that they spend on items they would have otherwise done without, sales tax revenues should increase. If their increased spending also spurs demand for new products and creates jobs in other sectors like manufacturing and entertainment, this could stimulate the economy even more. So lowering your taxes (or more likely, disbursing a one-time rebate like Gov. Ventura did) is possible.
Point 2. Yes, price increases are likely, but probably won’t be too dramatic. Fast food joints in well-to-do (or at least better-to-do) suburbs routinely hire at a rate higher than the minimum wage already, but do not charge significantly more than anywhere else in the metro area. They appear to compensate for the higher wage by being more strategic with their part time workers, for example, paying $9 an hour for a 3-hour dinner rush shift rather than a 4-hour shift at $7 per hour. Part-time workers in it for some supplemental income seem to care more about the total dollar amount and often prefer the shorter shift.
Point 3. New technology has been making some jobs obsolete while creating new ones for decades, so potential automation of jobs is a factor. However, having worked in the food industry, I’ve found their setups to be pretty efficient already, so I don’t think more automation will replace jobs for some time. I’ve also worked in the bottom rung of the human/social services fields, which for some reason never pay the minimum wage, but rather seem to have traditionally paid about 25 cents above minimum wage. I seriously doubt that most people would be comfortable with a robot doing my old job, which included giving clients meds, breaking up fights, cooking meals, doing the Heimlich maneuver, and field trips.
As for our last point, most minimum wage increases after Reagan left office have been phased in to give businesses enough time to react. Before Reagan, the minimum wage increases were tied to the CPI, and businesses were apparently able to anticipate that. Minimum wage was frozen under Reagan.

I have no problem raising the minimum wage for for those people who find themselves stuck in minimum wage jobs yet still needing more money to live on. Unlike Dennis, I am a conservative who does agree that some people are simply not going to always be able to better their skills to get market rate pay that is livable. (But I’d at least like them to try – which is another point altogether – left for a different day)

But I have serious issue with the dramatic, 1 time increase being proposed. I am convinced it will costs jobs and/or raise prices because it is just too much for a business to absorb.

The other part of this, which is rarely discusses, is the number of minimum wage jobs that are held by those not needing the wages to live on. The best example would be high school students. I am not really interested in the kids at McDonalds getting $9.50 / hr so they have more disposable income on my $1.50 increased cost for lunch that McDonalds will surely pass along.

Hopefully, someone will propose a moderate increase plan over a period of time that will be acceptable.

Immigration reform is easy to enact right now without doing even an ounce of legislation needed: simply stop hiring illegal immigrants. If businesses don’t hire them, then they’ll go home. No job, no need to be here as the only reason they’re here in the first place is to earn money to send back to their families.

But businesses don’t want to take the responsibility on themselves. Instead they’ll hold off on doing anything until someone forces them to do so, all the while saying that they have to hire the cheap labor or their competitors will undercut them.

The Strib article on this story mentioned that Ms. English worked at lower level retail and fast food for 15 years. I have made the assumption that minimum wage is a start, and that as a worker gains experience and skills, they get a raise, and another raise, and another. I failed to consider that people might just move from one minimum wage job to another and stay at the bottom forever.

The Governor believes that the minimum wage should support a family of four above the poverty level. The new ACA will subsidize a family of four making over $90,000 per year, which indicates to me that they are poor. $90,000 divided by 52 weeks divided by forty hours equals $43.26 per hour.

Hopefully you realize there are myriad tax credits and deductions available to taxpayers of all income levels and that they usually have nothing to do with being poor. It’s called the AFFORDABLE Care Act for a reason.

The average $90K household (which has an average of 3 people) spends 5.0% of its after-tax income on health care. The average $150K+ household spends 2.8%.

The average $90K household average “savings” (after-tax income minus consumer expenditures) is less than $20K per year. For the average $150K+ household, it’s 5.7x that, even though its after-tax income is only 2.7x higher.

Prior to the ACA, employer-sponsored health insurance was already excluded from taxable income and is the largest federal tax expenditure. The second largest is preferential tax rates on capital gains and dividends, thanks mostly to the 2003 JGTRRA legislation.

The top income quintile derives 34% of the value of the first tax expenditure and a whopping 93% of the second. Overall, they get 51% of the value of the top 10 tax expenditures.

In 2011, the top quintile started at a little bit over $100K. So are you calling for an end to the deductibility of employer-sponsored health insurance and an end to preferential tax rates on capital gains and dividends? Deductions for mortgage interest, state and local taxes, or charitable contributions?

Are you in favor of ending regressive state and local tax systems (which they all basically are)? Like in Minnesota, where the top 1% pay an effective 9.6% and the bottom 10% pay 32.1%? And that’s before getting deductions on their federal returns for those taxes, of which 80% of the benefit goes to the top quintile.

I thought it was odd that we were subsidizing the top quintile, but as you point out, an income of $90,000 plus only puts you just below the top quintile. It appears that the ACA will be subsidizing almost only 90% of the population.

As for your last paragraph, we cured that problem by dramatically increasing the tax on the rich so the rich will now be paying their fair share. As to how much raising that tax affects the bottom 10%, I’ll guess close to zero.

19 states have a minimum wage higher than the Federal level. Within that set of states, there is a moderate positive correlation between the level of the minimum wage and per capita gross state product.

The CEO ‘s of any American based company receive an obscene amount of compensation while the very ones doing the work receive a pittance and slave away under mostly stressful and adverse working conditions. And yet we claim to be a moral nation but as of yet allow smooth talking lobbyists to roll over working people as they buy our political process thru contributions. Influencing policy in their favor time and time again. Greed allowed by using fear tactics and characterizing low wage workers as lazy and unmotivated. Trapping countless people in a system where there are few options but to submit or go without. And yet any moral and decent employer would realize his purpose is to empower not enslave his employees. Paying a living wage is a great moral booster and moral leads to more productive and content people.